Interim Results Presentation July 2018 Martyn Ratcliffe Chairman Rebecca Archer Finance Director To be read in conjunction with the Interim Results announcement released on 24 July 2018 In addition to IFRS measures, alternative performance measures are used in this presentation. Refer to the Notes to the Interim Results announcement for detail and explanation. 1
Financial Summary • Group revenue of £25.1m (H1-17: £18.0m) • Record revenue for the Group, benefitting from TSG acquisition • 85% of Core Business revenue from international markets • 32% of Core Business revenue invoiced in US Dollars and 14% in Euros • Adjusted operating profit of £3.7m (H1-17: £3.2m) • Negative foreign exchange effect of £0.3m compared to H1-17 • Statutory PBT of £2.5m (H1-17: £2.3m) • Release of TSG deferred consideration of £0.5m • Offset by increase in amortisation on acquisition intangible assets of £0.4m • Acquisition integration costs of £0.3m (H1-17: £nil) • (None of these adjustments affect adjusted operating profit) • Adjusted basic EPS increased by 15% to 7.0 pence (H1-17: 6.1 pence) • Basic EPS of 6.0 pence (H1-17: 5.1 pence) and diluted EPS of 5.8 pence (H1-17: 5.0 pence) • Cash balance of £18.5m (H1-17: £26.3m) and Net Funds of £5.1m (H1-17: £12.1m) • Net funds + freehold property per share of 66.8 pence (H1-17: 86.2 pence) following investment in TSG 2
Group Revenue • Record revenue, benefitting from TSG acquisition • Organic growth strongest in Medical sector • Negative FX impact of £0.3m in period 30 25 Non Core: Property income 20 Revenue (£m) Other core business revenue 15 10 Core business: Services revenue 5 0 H1-12 H2-12 H1-13 H2-13 H1-14 H2-14 H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18 3
Revenue by Currency/Geography • 85% (H1-17: 80%) of Core Business revenue derived from international markets • 32% of Core Business revenue invoiced in US$ (H1-17: 32%) and 14% in Euro (H1-17: 9%) • Employee Distribution - UK: 84%; America: 11% and Continental Europe: 5% 100% 100% 90% 90% 80% 80% 70% 70% Other Other 60% 60% GBP UK 50% 50% EUR Europe USD 40% 40% North America 30% 30% 20% 20% 10% 10% 0% 0% H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18 H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18 Core Business Revenue by Geography Core Business Revenue by Currency 4
Service Offerings Revenue Profile Service Offerings Overview • Applied Science & Product Development • Organic growth on both year-on-year and sequential period basis • Medical sector strong organic growth • Commercial sector decline year-on-year but maintained H2-2017 levels, as anticipated Applied Regulatory Science & 37% • Technology Advisory Product • Flat performance led by Food & Beverage Development and Consumer with Energy still slow 48% • Regulatory • Performance from TSG operations in USA Technology and Europe meeting expectations Advisory • Food & Beverage continuing to perform well 14% H1-18 Core Business Revenue 5
Market Sector Revenue Profile Market Sector Overview • Medical: Continued strong performance in Applied Science/Product Development. Food & Beverage 18% • Commercial: Benefitted from TSG Medical acquisition. Market still slow in some 34% sectors. • Food & Beverage: Steady performance Commercial with greater integration of service 49% offerings H1-18 Core Business Revenue 6
Adjusted Operating Profit • Record H1 adjusted operating profit • Foreign exchange negative by £0.3m in H1-18 compared to H1-17 • Margin decline related to TSG acquisition integration 4.0 24% 3.5 Adjusted operating profit margin (%) 3.0 18% Adjusted operating profit (£m) 2.5 2.0 12% 1.5 1.0 6% 0.5 0.0 0% H1-12 H2-12 H1-13 H2-13 H1-14 H2-14 H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18 7
TSG Integration • TSG acquired in September 2017 • Gross consideration of $17.0m (£13.2m) funded from existing cash resources • Net consideration was £10.4m, including £2.8m cash acquired with the business • Net acquisition integration costs of £1.1m incurred since acquisition • USA Integration Programme • Separation of systems (incl payroll, benefits, IT) from vendor completed • Made good progress on improvement of financial/operational controls and processes • Segmentation of client base to focus on profitable sectors • Europe Integration Programme • New Head of TSG Europe appointed, supported by Ops Director and Business Development Director • Creating integrated European strategy rather than historic autonomous units • Launched French subsidiary and recruited new team • Closed sub-scale subsidiary/branch office operations in Central/Eastern Europe. Appointed agents to cover these territories, consistent with other geographies • One-off cost included in acquisition integration costs above 8
Freehold Property • Science Group owns two freehold properties • Harston Mill is owned by Sagentia Limited, the largest operating business • Great Burgh is held in a dedicated subsidiary with leases to 2 of the operating businesses • Considering moving ownership of Harston Mill from the trading company to a separate company • Benefits from changing ownership of Harston Mill • Separate property management from trading activities – financial performance and risk • More flexible funding structure related to property • Tax Implication • Historic structure enabled property development costs to be taken as tax deductible expenditure • Transfer of property will create tax cash outflow estimated between £1.8m and £2.1m • Liability of £1.7m already included on Balance Sheet • Possibility that tax losses in “Investment Subsidiary” can be utilised to partially offset (approx 50%) over a 4-5 year period • Board are exploring the options 9
www.sciencegroup.com www.sciencegroup.com Head office Head office Harston Mill Harston Mill Harston, Cambridge Harston, Cambridge CB22 7GG CB22 7GG UK UK Phone: +44 1223 875200 Phone: +44 1223 875200 info@sciencegroup.com info@sciencegroup.com 10
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